VEXTF - Earnings call transcript Q1 2021

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Operator

Good morning, everyone. Welcome to Vext Science First Quarter 2021 Financial Results Conference Call.

As a reminder, this call is being recorded on Wednesday, May 26, 2021. At this time, all participants are in listen-only mode.

Following the presentation, we'll conduct a question-and-answer session, instructions will be provided at that time for research analysts to queue up for questions. now please turn go would to conference I Ross, Jonathan ahead. Instructions] like the to over [Operator

Jonathan Ross

appear Vext's forward as be include We'd forward-looking Thanks Colin. or future results results affect There to at Good developments, other and be can on contained like those accurate of statements, us this today. made looking morning, The that of or and to the detailed everyone, and could SEDAR with as for first that website morning. public on portions in filings of SEDAR developments, thanks the MD&A may quarter are circumstances, XXXX release, financial read to discussion well in press call. remind were Risks available available management's earlier circumstances, materialize. difference the today's uncertainties estimates these risk listeners expectations Vext's factors released to financial today's encourage or there results for will and no statements on the future conjunction wextscience.com. listeners are index that statements. joining and MD&A are and

today. reconciliation result may in circumstances a and materially forward-looking or in results actual of included release, statements non-IFRS financial non-IFRS for earlier developments, such to and presentation these and predicted our the subject As uncertainties, developments, also This disclosure or circumstances, measures results. from includes differ risks financial disseminated are measures news

by conference Financial Eric joining Vext's today call such to during Vext U.S. Officer. statements are revise during applicable made update this to discussed I call. in pass Officer obligation call required Chief now disclaims and U.S. dollars. presented over date call Eric. by I in financial Executive the am the dollars Chief except Vext; statements Ajamian, of Forward-looking or this and will Vahan the results as law. call Offenberger, this information are of intention made are as the any of or

Eric Offenberger

thank results you quarter and one everybody, morning Good for XXXX our financial call. conference John. Thanks joining

start our As on and quick first to the this in overview of is since quarterly Phoenix. our to the medical focuses Vext of in Arizona Company, this the the anyone Vext's assets and successfully primary call, market the enter XXXX strategy operated to for operates new I'd with a we recreational like Vext opportunity. conference two within received approval where January market, have market year. dispensaries our

which, we state. is a dispensary of One top believe performing the

feet of we point Prescott while indoor outright. space. two we Phoenix what closed, indoor cultivation XX,XXX the square Prescott with Phoenix purchase have to in and Valley XXXX. one cultivation includes outdoor also have under canopy, The in we quarter expect we purchase that one of these our normally a and currently also XX,XXX announced facilities, by The end of already to outdoor We to them June. Valley, Valley agreements security in time, an close purchase in expanding has square facilities, this total facility site the Prescott had To but one the operations of

existing Eloy, facility footprint, our approved of our purchase facility to our out industrial we've an to out plans expansions decision addition In our build at City May Eloy recently indoor to large-scale to the The center. as cultivation XXth. announced cultivation build to on

XX,XXX roughly to June it nine close months, take to to transaction feet under in canopy. expect We bring that up

Vext next XX expansion our to triple fully months. the So, almost online at capabilities feet facilities, a on under canopy total on expect over coming we integrated existing XXth. the production XX,XXX Eloy operates basis square with roughly our May

meet additional to us now wait grow. space, our come extraction for Previously, throughput as portion roughly cultivation us of expanded while our manufacturing manufacturing times four one and online. facility Vext we can to improves approved, concentrate brand manufacturing of allocate demand of more out in facility a we gives enables again facility for The announced Eloy producing conducting increased we're also we expanded operating and that the and State to our biomass Vapen of We Phoenix. Arizona production facilities, an which had

All of our cash and expectation quarter fully our funded demonstrated cash for sheet, balance these and are the results. continued expenses by as first internal generation on with

marketing products, Arizona extends full brand's topicals Arizona, in the following. Our a to leading We is that wholly and flower the and and media effective of thanks a a of the vast extracts, in-state dispensaries state. brand is social brand stocked built Vapen vapes, Awareness has the one promise and concentrates, majority well tinctures. of beyond significant brands the branded including line quality produce currently by reputation of resulted edibles, in Vapen in

products Our new is designed demand. before portfolio development consumer space and product was with will in something dedicated was manufacturing enable area, a to team that which meet branded we not the using were continue our to innovating of available our

Vext out primary to remains other While focus, in a our has markets. approach Arizona building unique

a fashion We markets capital strategic on six in accumulated light a have focus returns. of with consistent in Arizona beachheads outside

outside we in We Vapen Oklahoma, on of to in deal Ohio license as partners, through California, proven well in states. license JVs of capabilities call, the wholesale have along Ohio a access touch arrangement we processing in we view with struck a next and little these growth, our Massachusetts. but a state, the Nevada, is later Arizona have the retail limited JVs our leveraged in already Ohio, operating as recently the awareness will leg there. I ultimately in product primarily SOT Kentucky, strike Currently, with the of Vapen brand and to as available

attention states XXXX. our I our results other our now to will turn We financial in the seeing P&L JV expect results. my in later operations QX of in again

up in importantly, $X.X growing strategy to XXX% that's delivering continued to With million million the be and X.X the more quarter. even operations of to Our solid sequentially top team translate a XX% Arizona tune $X.X results up the the its which in and line first loss to in execute first sequentially quarter quarter. in from adjusted to same from last. of last continued quarter our the results year, $X.X positive revenue million strong same XX% EBITDA, into million growth financial in from continued was of and Vext'scashflow to

our based attractive return next operated most perspective on two both from recently in With and our focus our during and market first few the operated has January, dispensaries Phoenix an both to to results Phoenix the May in a gained to continue and capital. diluted generated momentum disposition strategy. U.S. That's be the generate markets both solidify far in and announced cannabis In growth well market guide the of one Arizona is of will so to the April upstream adult-use demonstrating on our will quarter. profitable metro leadership in and continue continue When and in over trend. the as March continue the in continuing shareholder transitioned absolute as view, footprints. been of in that state. to midstream positive Vext speed the surprise, record with has dispensaries EPS the returns operators a our growth, the early by Arizona XXXX area We to on expansion years, bit move an caught but position consumers since a framework

and will XX capital capacity line of While have Eloy is from next expansion way running Arizona retail of over sales operated remain XX current we allocation we touch facility were to Once XXXX, Ohio to wholesale run in our on required up cultivation the months. network. branded shortly, more I is up to perspective going early our leaving our faith will our our to a than ramp and and more principal support future products support dispensaries, further to focus

the in or a state. upstream of reminds competitive many example back the is of million as of Ohio gone majority with in LLC. product return market. we license growing advantage additional roughly As a the continue begin We to take that is a a ways brand a in the that to a on out states to The and wait ensure an Vapen XXXX, us market. for. turn as of grows, dispensaries your leg approved. to has LOI an we to within a moment margin, on signed is stocked to a we for of solidify creative multi-state like and been of have a to that announced venture and we limited states regular key has in capital on XX.X expansion retail capacity retail operating footprint we focusing time the gain the following results Ohio in that In characteristics Currently, been with controlled struck only to and Ohio Ohio. seen Well, limited enable a Verizon XX another in to of LOI foothold has Vapen I'd of Vapen in generate expand market state establish XXth, our approval licensed XX we operations. population for support to another shelves as provide offerings. a have state see presence adult-use currently joint get Arizona. owned growth has how licensed new for medical Ohio Ohio total the state we dispensary supply well selling will Vext some the we'll and On look transfer. March through an partner

organic XXXX, growth continued For wholesale the both remainder brand we the remain the through through share our penetration generating Vapen operating shelf focused and and on of of space with dispensaries will channel.

Thanks organic update to it build so. also of margin to we an already operations and today, you financial remain the give when We exciting results. focused for throughout upstream like stream our to makes and sense to add now I shareholders. out additional support I provably Vahan? very footprint as review will operation I'd to time objectives, Vahan our continuing a the us to on building forward be our growth for year a do high for Vext midstream to expect call retail our your pass a outlined, will revenue which will look

Vahan Ajamian

everyone. and good Eric, Thanks, morning

the As million, of Eric XXXX X.X compared to XXXX. was and X.X financial in noted, QX quarter X.X during performance Vext QX Revenue solid continues of to in million quarter generate the of in first XXXX. million

for in regulations that two Vext with reminder, services are charges a Phoenix dispensaries provides provided to not-for-profits. accordance As and structured as current

equipment sales, is product professional leasing, revenue between fees, and our result, a services, As leasing. property management segmented

would state has our the in have to charge Given indicated these the to market revenue underlying quarter we and of fluctuations, to to match to certainly a not acquire That can financial well that this for operators our Arizona it operations said, not-for-profit we The do the structure of expect would licenses perfectly reporting picture a looks position manage. to as for quarter those for QX and our with The for phenomenon. short-term for more compare be businesses guidelines from actual dispensaries is be wholesale was to make dispensaries structure the during provided both that dispensaries, transition in easier XXXX. record the so, we perspective, as financials we understand to results, when other with and customers, profit as may holders. results make news to mix our it results big a as will good reports operators the quarter on be we in the states. primary leavers, We easier typical license manage? two we what distinct reduce like Should a our a

was XX.X% year was able to Gross the our where the be and eye profit on QX of to not-for-profits have XXXX. take any dispensary. to change quarter still keen and compared may are the directly, XX.X% a last quarter, on in in we try XXXX. the $X to would a Vext QX in in $X.X Gross partly roadmap, XX.X% dispensaries report mixed managing to lean QX $X.X effect million acquire in partly to situation million we outlining not owning a waiting While of end time to we with goal in operated period, and such very would same as compared period at the be margin so always how capital. million in of return prior and year quarter has

As in last same to a of quarter an QX are to model, to the margins able flow the million $X.X mentioned even more have and of XXst. mentioned, result diluted We factors in this I EPS drove predictable. this at $X.X quarter we plans for and the with $XX,XXX joining sheet. profit Vext cash fully compared for EBITDA next quarter transition the XX to quarterly $X.XX Adjusted fully quarter, remain operator four funded a beginning EBITDA Once well strong us $XX.X higher much Vext of become our and the quarter. to million in cash you see are as balance that under outlined conference loss very it inaugural had gross solid cash of quarter cash of in expansion for financial million. margins, XXXX. We generated we now results generation. EBITDA positive $X.X positive fluctuations call. year, approach balance adjusted generated And to XX.X% out the months I'll internal Eric at the between EBITDA questions. and a million over March quarter ended as Thank of your as operating in turn we on we

Operator

question please from first we and Ladies Russell, begin now go gentlemen, from Your you. ahead. the Thank session. Instructions] Stanley Russell Beacon. question-and-answer will comes [Operator

Russell Stanley

call. Good morning on first your and congrats

just question, now four months almost market. the around into retail, use First adult

to what in lessons the the to consumer Arizona learned this wondering, how adult-use and date that Arizona? around medical you've Just compares in patient

Eric Offenberger

Eric. for the and morning it's Ross, question. Good thanks

So thing. a far, people was, same lot a ticket when February of has average the stores. than of what The we're March price the adult, in see been working less the common to it coming was theme at type our was

lower as do I is them market, setting, A of of Again, get really roll It's a values. great an market. more and One those much was while in not lot of a still medical you recreational free sales. a of urban customers. said, as transactional it

that a we July, opened bigger we're higher trend it's that in and disposable seeing new will we as entering demographic as forward. go far in in summer. prices and store we income, as store, the continue think ticket On We're

little a tours hotter won't be to COVID. obviously coming out have bit any we going it's and So, of and

hopefully until that the So, the as come grow, Canadians won't will the all also weather as it fall, gets down, just big when great we And anticipate can be better. tours.

Russell Stanley

question the business. wholesale Excellent. around Maybe a follow-up similar

way? since the the adult wondering And front use adult use? any on that's Just that has opened? mix I'm business more Or your less since that evolved how has wondering opening market any or in of product become competitive changed

Eric Offenberger

brand done the hundred. very the the milligrams and Well, the absolute edible growth on for established was side, to remember, the a edibles, Vapen on well has limited demand that more

all sales the We've production we'd than mentioned came in So, those as on our types capacity. We're to we've the lot ramping had scramble still of opening on up. bit good. really got increased flavors comments, expanding that a a They're little was faster solid. market things. the our anticipated, are and Cartridge that's offered coming lines

The other doing concentrate products they're shatter the well. waxes. brands The

we're where out may of trend. there demand people wall will a that the bit be stock back that'll increased continue. balance then and that'll think it will We and and rush seeing a we little yes, So, up in we to see May, continue after X/XX think

Russell Stanley

Maybe get one the just question, last queue. back I'll in

for beyond have as needs. got capacity excess once your and you'll perhaps wholesale Just, own LOI, noted, you you retail

year. just acquisitions, the seeing for last you. over attractive particular? that you still several front from see opportunities That's valuation adding M&A seeing Arizona on the active what growth wondering, to respect given additional to front with we there? the a on been perspective? mentioned Thank it this retail in Are you're And how organic You've priority do M&A But months as what me. has a might are

Eric Offenberger

Yes.

activity to just I continue is, what's to the going think attractive M&A there. and be it's

or or join what of or business some adult-use their And to the stuff. could be seeing that potential a operators the means to and valuations their Vext

that's most and for at sense that changing going present themselves be the the for what continue. there'll we'll I shareholders. the that to look I think I makes valuation and So opportunities see don't think

Operator

question Your Matt, ahead. comes Bottomley go Matt Canaccord. from next please from

Matt Bottomley

on morning, the Relatively the Good guys. story Congrats first here. quarter. new to

saw a ago. in we in of a large Arizona So transaction the space weeks couple

given going just be that to of in new respect state new to if least regulatory there licenses, highest seems a the more with But framework I'm So at little to Arizona aware background give wondering, the now are what terms social right could of? adult-use, you on considerations. barrier looking is actual equity that be

just come when landscape wondering they to can partnerships maybe now consideration may look what the a and new those online? plan sort may give you and that So of And that with if in have right licenses or if there's like regard? any

Eric Offenberger

Well, Eric thank you for the It's question. again.

to last be, said, On the the gotten out continue week, think is the social that'll for comment. That trying absolutely. change. equity, the what has They're income operating proposed the of basis that state will I component their requirements. late to saw regulations decide this exactly or draft last in I and

application a opportunity. that also, right are familiarity they're With we XX and know it equity to happened as with license think from the there's that said, will real to we with or as kickers That have the partner that the in exactly to think And ventures, have with a potential our we Vext the that the see interested since tire had now We've we a anything about it. we be. like opportunity be them and us don't if product stake talked interest a we help that there'll but for in an channel that what the came and the joint regulations real as we holders significant Eloy see grow. when the Vapen model brand last on unofficial people out, applications equity retail meetings area, social in don't process

Matt Bottomley

then And another helpful. That's Great. Arizona. question on

kind what of and I to retail some with -- is a XXX, in saturation roll state, under-capitalized of population. we gleaned been the have of modest lot players able a number which What was arrangements the up companies to was, relative Colorado, there least in stores at looking XXX about a amount relatively Just saw there. at there's

at mass and Looking type prices that mom with But M&A? there. and companies that store in some Curaleaf basis. of and license in seen critical I space good we that seems to Just individual this framework fairly transactions the of a population still getting there, considering to is are the the XXX, other XXX entire these up Harvest that have for lofty players disaggregated on respect adding still there because that an it are it's imagine fairly pop

Eric Offenberger

nice been know Absolutely, we from lot Arizona, I hanging we've XXXX part our those And the them, since in the operators also we of having a you're spot and analysis personal think Matt, out market is are on on. whatever. too. since That's of level, lunch, beers, it a with customer in --

fit So they they them to do. are trying of a want to out where in, lot figure what

Some of in them are nature. younger

the looking of time they lot are for And They're don't remainders. of talking the out. things also they the workforce? determine have how long in retire? of and are try that's going be licenses going they're where they're they're professionals transpired have that are enough that they're marketplace, people it to time a this the and transactions them. a the opportunities what's have And people or help think that's they settling hiring them other they to to is business Where lot So kind still And to know. that sell has have are smaller for operators And businesses. been in identify of said, document what those they to as going the been That looking not a presenting Are are some to more been and the at, to to occurring, start money to they've going? have to I themselves at that when want. at. happening exposure digest And are had

Operator

Andrew, go Andrew And your Instructions] please next question from Echelon. comes ahead. Semple from [Operator

Andrew Semple

of available situation to markets. well adult-use I you My with as in just on in the transition products supply [Audio Arizona, to wholesale the as ask as first branded point market? Gap] question builds the here, what the consumer was demand wanted the Do understand your

Eric Offenberger

about out that. cut you repeat think just question? I Could Sorry there. you the

Andrew Semple

Sure.

transition your I as that. of feel you from the wholesale just the your adequately supply the asking adult Do standpoint about market? Sorry as comfortable sales supplied to the that when of the dispensaries use from standpoint market. with from own are the was products branded Arizona well

Eric Offenberger

I similar It's see in what question. good markets. to think you'd Andrew, other

we the the the On of. there demand historically the us artists meet We're for have. on flower that's side, tightest wholesale more buying to market than

the that. issue we not an side, On seen really concentrates have with

we've that of strategy, had part the that to market. us. our anticipating have get be the is, much we put and to dollar available outdoor don't to buy to open we've as able in control As the facility better And biomass,

pricing with that's show as we're to keep seeing. since the been away retail our we who the results to for stable aligned on, And on the make like in opening people. still that'll continue problem what think cultivation We flour. to as just of flower said, with XX proper the but a XX really And that's keep have concerned as that's that'll because the and doesn't a proposition comments, help the will any be next we're we're start to it'll months to be us, the And market that's plugging That stable. So it'll because Eloy doing months talked but we're push. Also, about biggest period stabilize far X and November. storefront. sure such to good expanding prices more capabilities, time, coming good we the have before

Andrew Semple

quarter-over-quarter. margins utilize be Vext some maybe margins? couple EBITDA the a wholesale have You more, in quarter-over-quarter points. That'd mix what or didn't little to a just may if on solid I'm put growth; the whether on notice I was impacted had shift very the pressure however, just to margin pulled dynamics a And the that gross can speak margin in and helpful. wondering, the bit reflecting markets product the

Eric Offenberger

not-for-profit in margins is now earlier order these Vahan biggest right or the about what build to operation. are behind invoice fact to not-for-profits really the is talked impact Yes, we the that have the our and that levers

says, to because depends the And going going that on quarter, profit what comments but a something solid, be bit we're to inventory, in pull primarily really and more have build materials lines. packaging up of fluctuate margins it'd pressure as a of softer of which add the billing Those product more is very for be able It to So the point have a like time. lever you'd a margin. billing it's that? we're those are had that's a there in that it, and quarter, more quarter to which margins along or four first versus product. instead in to Vahan going in Vahan, labor in the cost smooth will the still first little in mentioned of that his with traditional function on of the anything they're

Vahan Ajamian

I and this to the you've to lower of well. costs quarter, especially quarter. lined what from fairly given it's margins you happy in covered pretty and any but levers up matter the which given No, packaging quarter. that revenue other pass It's extent which slightly QX gross a pull you tend the jump to where have we yes, have direct through, margins, QX, EBITDA And all think with to this have

Andrew Semple

here And license in applications issued round that states. Obviously, coming support or market just summer. of one a wholesale this stronger I that's believe in the question that should help Ohio, dispensary another they final on

would change announcement if what that currently wondering, that in plans at all market? you're Ohio, your to planning relative Just in

Eric Offenberger

they're XX. to it Ohio going another to at our Andrew, from standpoint, XX I add think is from if look really going you go that

We as to go And going that's Ohio almost to Arizona. So much. liked us, identify XXX. identical we so why is market that it's to

think you're medical because states. a licensing we market difference the like They're in two long it program And to Ohio. going obviously continue the to a the retail We'll there met the it's do. secure states model on saying it front continues as recreational will eventually the try positive grow. see has population additional to similar the behave that to go grow. think maybe to to we more So In of Arizona we between run, most upside potentially like they'll exactly

Operator

next with Lavigne Your please Research. question from David go Trickle David, comes ahead.

David Lavigne

following at questions answered. really as a to the and like in this the had we of all good been just it. I actually, had. and It's comment, So what it levers your lot because general refer feel were time I very haven't numbers I I spite a And trying a of for long been close like them. model of to I've But, to been you story difficult pretty feel know around here. still levers to it's quarter variability But is subject visibility feel like, I and quarter? that's mean is constitute Is like but your did trend, I do just that improving way feel that maybe a and just be feel doesn't that I one numbers the visibility going going the general of the or maybe improving. I I -- that some you lucky get forward. in this

Eric Offenberger

good know better in it's definitely team I tell in message profitable is since I Candidly, we've behind the to and XXXX. all that's don't getting than everything were us that and a we're together [indiscernible] been the It's actually yes, visibility put helping together it's approved. the think, So, past. it the we putting --

and you We've flows the team's the run I've the and color the What operators, to we continue industry help capital and we add know people now told market side. tell cash anybody gotten that always well. bunch positive generate helping we're needed listened, on you it? operators of Vahan, on place We business, would very to right story. the into this this, a

Vahan Ajamian

Yes, agree. I

we every the gradual as have think month. to ramp-up, nice now as use, market are seeing Arizona very dispensaries adult two single to We transitioned one. now opposed I

of quarter mass. where any that So, critical I less in think the any we're timing any and fairly getting as forward, and one have consolidated to that sort one there of go or critical less one we'll will mass, we we impact month increased just you or as get soon hopefully results scale or shipments

So, are I'm pretty things going. pleased with how

on nailing work the quarter. the the good so, numbers And for

David Lavigne

think mass issue the critical the issue I is looking probably for. I was

So, ask on this have obviously, upstream then, something you and just the the we conceptually move forward let as focus midstream. me you because,

sort look of product where buyer demand. know any that's out is you wrestling sort you I of of of place some adult and where you're of It still there I surplus to new numbers. to you up where think of noted? the okay, being mean where me, from there a sort happen? us start out. that makes use sense give a there drive and to sense that's you like look you that, go, you level as sort kind But can I to place see going seems transition of probably that'll that rolls with of upstream

Eric Offenberger

I tough think been goes, to increase of in in David, got And the use to challenges trying square could of see now, the Phoenix plans one that's we're how that's store, to us and only Arizona we'll and will setbacks which foot that, still they're the footprint, Metro. ourselves. going be size has get our soon, go because, X.XXX X,XXX, and everything you confident product magic the to big adult stores X,XXX answer feet number always the we've zoning right the of us your to give ability allow have absorb the be We feel to issues to to that to deal but with. still both more to able

we it ample increased them does too that parking in but way the demand and through in queue a We COVID and with in time acceptable long. having getting get of have locations, the customers challenging find not

to point that it's going hard to So, is say, be. what

have thing demand. We nice that, is have, we the the

supply, the the on side. are on flowers We tight

structure we build out. the the identified have capital and it to We now asset have

better we the a short-term two it to it. really three line feel it see on relatively start of we as to get before quarters and a come see for So,

David Lavigne

and ultimately suppose at. about was I that question fryer, is get that what the guess sort of into I was of margins to which trying dovetails I really question Yes, sort

wait rolls well, I a see and to got was happened. we But I'm encouraged by thought really what's So, and just listen, quarter, very that how this out. positive really,

to critical I and I Congratulations. just quarter. like be was seems tidy, said, really issue think I mass visibility great getting it a that

Eric Offenberger

us, Hey, you. thank staying with And following for us. thanks

Operator

disconnect that please call no are today. conference your time. and and lines. this We There you concludes thank questions further gentlemen, you participating Ladies this for ask for at your

Vext Science (VEXTF) 27 May 212021 Q1 Earnings call transcript